چکیده انگلیسی

In a model with search generated unemployment and heterogeneity on both sides of the labor market, exporting firms are bigger and pay higher wages than other firms. Moreover, there is imperfect persistence in the decision to export and liberalization increases the wage gap between high- and low-skill workers. Openness can increase aggregate productivity in export-oriented markets while generating within-firm productivity losses for the weakest firms. In contrast, openness can lead to within-firm productivity gains for the weakest firms in import-competing industries.

مقدمه انگلیسی

Even within narrowly defined industries, firms that produce similar products often use technologies with different levels of sophistication, employ different occupational mixes of workers and pay different wages. If one looks for patterns across firms, then recent findings suggest that firms that adopt more modern technologies tend to employ more highly-skilled workers and pay higher wages than their counterparts (Doms et al., 1997). The purpose of this paper is to show that by combining this insight with the fact that unemployed workers must search for jobs, we are able to develop a simple model of a product market that is consistent with a large number of the stylized facts about industry dynamics in open economies and the impact of openness on productivity and wages.
The stylized facts of interest can be found in two related strands of the literature. One strand consists of firm and plant level studies that establish the existence of significant differences between firms that export and those that do not. Exporting firms are typically larger, more capital intensive, more productive and pay higher wages than their counterparts (Bernard and Jensen, 1999a). These studies also indicate that there is “imperfect persistence” in the export decision in that firms often change their export position from one period to the next (Roberts and Tybout, 1997 and Bernard and Jensen, 1999a).1
Related studies have focused on the impact of openness on productivity at the firm and industry levels. One key finding in this strand of the literature is that openness tends to enhance productivity, although the mechanism is unclear.2 At least three possible explanations have been offered. First, openness may allow exporting firms to take advantage of scale effects as they expand. Second, there may be increases in total factor productivity at the firm level, perhaps due to “learning-by-exporting.” Third, since more efficient firms tend to export, liberalization may lead to a reallocation of market shares away from the least productive firms, resulting in higher aggregate productivity. Note that in the latter case, there are no within-firm productivity gains, only an increase in average productivity at the industry level.
Empirical studies do not offer much support for the scale effect explanation (Tybout, 2003), and provide mixed findings for the two other theories. Aggregate productivity gains in export-oriented industries are largely attributed to the fact that (1) it is the relatively efficient firms that choose to export; and (2) openness seems to trigger a reallocation in market shares in favor of these firms (Bernard and Jensen, 1999b and Pavcnik, 2002). It has been difficult to find evidence of within-firm productivity gains in export markets (Clerides et al., 1998, Bernard and Jensen, 1999a, Bernard and Jensen, 1999b and Aw et al., 2004).3 On the other hand, there is evidence of within-firm productivity gains in import-competing markets ( Pavcnik, 2002, Fernandes, 2007 and Topalova, 2007).
Motivated by these stylized facts, we develop a model where the product market is perfectly competitive but the labor market is beset by frictions. Specifically, our labor market is based on Albrecht and Vroman (2002) where workers with different skill levels search across firms for a job while initially identical firms must choose the type of technology to adopt. In equilibrium, some firms adopt a basic technology, employ relatively low-skilled workers and pay low wages, whereas others adopt a more advanced technology, employ high-skilled workers and pay high wages. One of the key features of the model is that if the revenues generated by the two different types of firms are sufficiently close, it is possible for underemployment to emerge in equilibrium. This occurs when high-skill workers, who are better suited for employment at high-tech firms, accept low-tech jobs because they happen to match with them first. Consistent with other models of firm heterogeneity, we show in the current setting that it is the largest, most productive firms paying the highest wages that face the strongest incentives to export. Moreover, we show that imperfect persistence may arise when equilibrium is characterized by underemployment. This occurs whenever low-tech firms that are matched with high-skill workers prefer to export their output while low-tech firms that are matched with low-skill workers prefer to sell their output domestically. Thus, our model predicts that the weakest firms in the industry may change their export position when the skill mix of its employee base changes.
When we turn to the impact of openness on productivity, we find that the relationship is complicated by the fact that there are two types of equilibria that are possible. Following Albrecht and Vroman, we define a “Cross-Skill Matching” (CSM) equilibrium as one in which high-skill workers will accept low-tech jobs (i.e., they are mismatched) and an “Ex-Post Segmentation” (EPS) equilibrium as one in which they are not willing to do so. If the economy starts in a CSM equilibrium and remains in one after liberalization, then we find that openness enhances productivity in export-oriented markets by reallocating market shares in favor of high-tech firms. However, within-firm productivity is unchanged. As for wages, since openness increases the surplus created by high-tech matches, high-skill workers employed by high-tech firms gain from liberalization. This increases the outside opportunities for high-skill workers with low-tech jobs, forcing the low-tech firms to increase the wages of these workers as well. On the other hand, since the number of low-tech firms shrinks, low-skill workers see their bargaining power eroded and may therefore lose from liberalization.
The fact that liberalization increases the spread between the revenues earned by the two types of firms opens up the possibility that it could cause the economy to move from a CSM equilibrium to an EPS equilibrium. When this occurs, liberalization's impact on productivity and wages is somewhat different. The main reason for this is that when high-skill workers start rejecting low-tech jobs, the number of low-tech firms falls dramatically. As a result, the aggregate productivity gains can be quite large and there is a greater likelihood that low-skill wages fall. In addition, since low-tech firms can now only attract low-skill workers, there are within-firm productivity losses for these firms. Thus, this case yields a surprising prediction: openness can dramatically increase aggregate productivity in export-oriented industries while generating within-firm productivity losses for the weakest firms.
In the latter part of the paper we examine the impact of openness on productivity in import-competing industries. Since import competition reduces the gap between the revenues earned by the two types of firms, it opens up the possibility that liberalization could shift the market from an EPS equilibrium to a CSM equilibrium. If so, then the fact that high-skill workers start to accept low-tech jobs means that import competition will generate within-firm productivity gains for low-tech firms.
Our model can be viewed as a contribution along the lines of Melitz (2003), Bernard et al. (2003) and Yeaple (2005). These papers attempt to explain why exporting firms are different from their counterparts, and generate aggregate productivity gains as the result of market share reallocations. In Melitz (2003) and Bernard et al. (2003), heterogeneity on the firm side is exogenous in that productivity is determined by a random draw. Firms make their exporting decision after learning their productivity, and, as in our setting, it is the high-productivity firms that choose to export. Openness then leads to a reallocation of market shares towards high-productivity firms and results in some low-productivity firms exiting the market. Yeaple (2005) generates endogenous heterogeneity across firms in the same manner that we do: initially identical firms make technology choices knowing that different choices allow them to employ different types of workers.4 He shows that since the high-tech firms gain more from exporting, they have an easier time covering the costs associated with doing so. Consequently, just as in Melitz (2003) and Bernard et al. (2003), high-tech firms self-select into exporting.
While these papers model the relationship between liberalization and industry-wide productivity, none are able to explain within-firm productivity gains due to changes in openness, nor do they address the issue of imperfect persistence.5 In contrast, our model is able to generate both of these features due the unique manner in which the labor market is modeled. In addition, due to our labor market structure, our model and Yeaple's generate different predictions about the impact of openness on industry wage profiles, an issue we discuss at greater length in the text.
After formulating the model in the following section, we rank-order firms according to their incentive to export (Section 3) and show how the decision to export impinges on domestic supply (Section 4). 5 and 6 illuminate the impact of liberalization on firms and the industry, respectively. We provide some numeric examples in Section 7 to assist in cementing intuition, and briefly conclude in Section 8.

نتیجه گیری انگلیسی

We have presented a model based on Albrecht and Vroman (2002) in which managers differentiated by ability search over firms for jobs. Initially identical firms are ex-post heterogeneous as some adopt a basic technology and pay low wages, whereas others adopt a modern technology, employ high-skilled managers and pay high wages. As in Melitz (2003), Bernard et al. (2003), and Yeaple (2005), we find that exporting firms are typically larger, more productive, and pay higher wages than their counterparts. In addition, as in Yeaple (2005), the firm-side heterogeneity in our model arises endogenously as a natural outcome of profit-maximizing decisions.
Our paper departs from previous work in the manner in which the labor market is modeled. Building on the insights of Albrecht and Vroman (2002), we have shown that industry dynamics are largely determined by two factors: the types of firms different managers are willing to match with and the types of matches that actually occur. In particular, we have shown that when high-skilled managers are willing to accept low-tech jobs, imperfect persistence in the decision to export is a natural feature of equilibrium in that these firms will export when matched with high-skilled managers and sell their output domestically when matched with low-skilled managers. Thus, our model yields strong predictions about how the export survival and birth rates will vary with firm level measures of productivity and wages.
We have also shown that when high-skilled managers match with adopters of basic technology, openness enhances productivity in export markets by reallocating market shares in favor of the most productive firms. In this case, openness has no impact of within-firm measures of total factor productivity. While these two results can also be found in Melitz (2003), Bernard et al. (2003) and Yeaple (2005), a new possibility emerges in our model due to the fact that openness alters the spread between the revenues earned by firms that choose different technologies. In export markets, this spread is increased, causing the wages offered by the firms to diverge; whereas in import-competing markets the spread is decreased, causing the wage gap to contract. As a result, liberalization may alter the job-market preferences of the high-skilled managers. We have shown that in export markets, liberalization may cause high-skilled managers to reject job offers from firms that have adopted the basic technology. This then leads to large aggregate productivity gains due to market share reallocations and within-firm productivity losses for the weakest firms in the industry. In contrast, liberalization may cause high-skilled managers to start to accept these same jobs in import-competing industries. This would lead to within-firm productivity gains at this set of firms, an outcome that is consistent with recent empirical findings.
Our model also allows us to derive predictions that differ from Yeaple (2005) about the link between openness and the wage gap between skill groups. Since exporting increases the surplus generated by high-tech firms, high-skilled managers employed by these firms gain the most from liberalization. High-skilled managers employed by low-tech firms gain as well, since their outside opportunities are enhanced by the increase in wages paid by high-tech firms. Low-skilled managers, on the other hand, suffer nominal wage losses unless the domestic price rises sufficiently. The reason for this is that the shift in market shares away from low-tech firms (the only firms offering jobs to these workers) lowers the outside opportunities for low-skilled managers and weakens their bargaining power. These results are consistent with recent evidence that finds the wage gap between high-skilled and low-skilled rising as markets become more open.
There are a variety of ways to test the many predictions our model yields. We close by suggesting one test that we find particularly intriguing. In a paper closely related to Albrecht and Vroman (2002), Acemoglu (1999) presents a model of a labor market in which high-skilled and low-skilled workers search across (possibly) heterogeneous firms for jobs. He shows that two types of equilibria can exist. In the first, which he refers to as a “separating equilibrium,” some firms create high-tech jobs and match only with high-skilled workers while other firms create low-tech jobs and match only with low-skilled workers (thus, this is similar to the EPS equilibrium in the Albrecht–Vroman model). In the other equilibrium, which he refers to as a “pooling equilibrium,” all firms create the same type of jobs and match with both types of workers. Acemoglu refers to these jobs as “middling” and shows that middling jobs will be offered only when the relative productivity of high-skilled versus low-skilled workers is not too great; otherwise, equilibrium entails separation. In the latter part of his paper, Acemoglu (1999) offers a variety of evidence that in many industries middling jobs have been disappearing and have been replaced by the type of jobs that would be offered in a separating equilibrium. If we apply the logic presented in this paper to Acemoglu's model, the conclusion is that openness should cause middling jobs to disappear in export-oriented industries and appear in import-competing industries. This follows from the fact that exporting increases the spread between the revenues that the two types of workers can generate, while import competition decreases this spread. In his empirical analysis, Acemoglu does not separate his industries into groups based on their trade status. Our paper suggests that doing so might allow for a direct test of our model's prediction that openness can alter the nature of the labor market equilibrium.